As many WKSIs will soon be filing 10-Ks that forward incorporate Part III information from a proxy statement, be aware that an automatic shelf registration statement may not be available if the WKSI has not already made the Part III information publicly available. The issue relates to the filing of an automatic shelf registration statement by a WKSI registrant after filing a Form 10-K (that forward incorporates by reference the Part III information) and before filing the proxy statement.

Historically, the Staff had the policy (as set forth in the Telephone Interpretations Manual H.6) that they would not declare effective a registration statement on Form S-3 until the company either amended its 10-K to include the Part III information or filed its proxy. Informally, however, the Staff did allow registrants to do shelf takedown offerings from a shelf registration statement that had been declared effective prior to the filing of a Form 10-K.

At PLI’s “SEC Speaks” on Saturday, Corp Fin Chief Counsel David Lynn fleshed out this issue as follows. The Staff says that an automatic shelf registration statement filed during this period will continue to be automatically effective as set forth in the new rules. However, the Staff believes that the prospectus contained in the registration statement does not satisfy the requirements of Section 10(a) of the Securities Act and therefore cannot be used by a WKSI until: it files either an amendment to its 10-K or its proxy statement to include Part III information – or unless it includes the Part III information in a prospectus supplement to the automatic shelf.

The bottom line: while a WKSI technically can file an automatic shelf registration statement after filing its Form 10-K and before filing its proxy, it cannot conduct an offering under that newly-filed automatic shelf registration statement until such time as the Part III information is filed (via 10-K/A, proxy statement or prospectus supplement). We will be posting more notes from “SEC Speaks” soon…

SEC Chair Cox Discusses Disclosure of SEC Investigations

This Reuters article from last week quotes SEC Chairman Cox on the issue of when companies should disclose the existence of an investigation or the offer of a settlement. For Chairman Cox, the disclosure threshold is that “material” disclosures should be made – but he confessed that determining what constitutes “materiality” is difficult. The article notes a recent speech by Commissioner Atkins during which he expressed frustration with companies that disclose tentative SEC settlement agreements before the Commissioners had an opportunity to vote on whether to further pursue the Enforcement action. Here is an interesting excerpt from Commissioner Atkin’s speech:

“Often in the SEC enforcement process, public companies, or sometimes their regulated subsidiaries such as broker-dealers, decide to pursue a settlement with the Commission. In the settlement process, the settling party deals directly with our enforcement staff, but the staff does not have the authority to bind the Commission to the terms of a settlement. Simply put, the settling party is offering to the enforcement staff to settle the matter based on certain violations of the securities laws, with certain remedies such as bars, penalties, or disgorgement, and in return the enforcement staff is agreeing to recommend to the Commissioners that they approve the settlement as offered.

At this stage nothing is final, and because of that lack of finality I find it hard to believe that the agreement by the staff to recommend settlement to the Commission is, by itself, necessarily an event that must be reported to shareholders. Although we Commissioners have deep respect for the work of enforcement staff, I can assure you that the next step in the process is not a rubber stamp approval by the Commission.”

On Thursday, the SEC released a draft of the Final Report of the Advisory Committee on Smaller Public Companies and seeks comment by April 3rd. This draft isn’t much different that the draft report released before the Committee’s last meeting – the recommendations are the same, but some of the language has been fleshed out. Since the Advisory Committee is required to unwind in April, the Final Report is expected no later than April 23rd.